| Kenneth Griffin, Citadel (Bloomberg) |
Many of the largest and best-known multistrategy hedge funds are starting to chip away at their early-year losses.
Most of them posted gains in May, and many were profitable in April and March as well. Even so, they mostly remain in the red for the year.
Of course, multistrategy managers are not a monolithic group. They differ widely, depending on the markets they tend to emphasize.
As a group, these funds lost 1.22 percent in the first quarter, even though they made money in March. Investors say multistrategy managers have been reducing leverage this year, which can rise as high as 6-to-1 in some funds.
Looking at individual funds, Kensington and Wellington, managed by Kenneth Griffin’s Chicago-based Citadel, were up 1.7 percent in April and another 1.5 percent in May. As a result, the two multistrategy funds are now down about 3.5 percent for the year.
According to people with knowledge of the portfolios, Citadel’s Surveyor Capital arm, which invests in equities, led the recent two-month turnaround. Remember, back in February, Citadel announced it was planning to lay off more than a dozen members of the investment team that worked for Surveyor. In January, Todd Barker, former co-head of global equities at Citadel, replaced Jon Venetos as head of Surveyor.
Eric Mindich’s flagship Eton Park Fund, managed by New York–based Eton Park Capital Management, jumped 2.5 percent in May. This cut its loss for the year to 8.8 percent.
It is not known exactly what caused Eton Park to suffer double-digit losses through the first four months of the year. Last year it had a long exposure to Japan, long and short positions in Chinese stocks and options, and investments in U.S. stocks of companies involved in mergers. It also had investments in the credit markets.
In the second half of 2015, Eton Park began to reduce risk in its portfolio, at one point cutting its level of investment by almost half from the previous year. We don’t know whether or not it ramped up risk again afterward.
Millennium International, managed by Israel (Izzy) Englander’s New York–based Millennium Management, was down 4.2 percent in the first quarter but gained 1.7 percent in May. It is now down just 1 percent for the year. The New York firm has about 195 different trading teams managing its assets across these broad strategy areas: relative value, fundamental equity, statistical arbitrage and quantitative strategies, merger arbitrage and event driven, fixed income, and commodities. The firm also is said to have brought down risk earlier this year. Millennium, which was closed to new investors late last year, has still not reopened.
New York–based D.E. Shaw & Co.’s Oculus Fund is down less than 1 percent through May. We don’t know how the fund fared last month, but keep in mind that quantitative strategies play an important role at the firm in general.
Several funds that were already up for the year extended their gains last month. They include Paloma International, managed by S. Donald Sussman’s Greenwich, Connecticut–based Paloma Partners. It gained about 0.6 percent in May and is now up 2 percent for the year. Unlike most other multistrat funds, it was profitable in the first quarter, gaining 1.2 percent for the period. Paloma does not devote a lot of its assets to long-short equities. Rather, it has a heavy concentration on algorithmic quantitative strategies.
New York–based Hutchin Hill Capital, headed by quant specialist Neil Chriss, returned 0.3 percent in May and is now up 0.9 percent for the year. A decade ago Chriss was a managing director at Steven Cohen’s SAC Capital Advisors. According to Hutchin Hill, the firm focuses on liquid investments in fundamental and quantitative strategies, emphasizing four investment areas: global equities, fundamental long-short credit, global macro, and systematic and quantitative strategies.
New York–based Elliott Management Corp.’s two main funds, Elliott Associates and Elliott International, each gained 5 percent for the year. However, unlike the other mutlistrat funds, Elliott’s funds posted a small loss in May.
Carlson Capital’s Double Black Diamond returned 2.31 percent in May. This put the fund, managed by Dallas-based Carlson Capital, in positive territory for the year, up 1.24 percent. The fund combines relative value, equities, risk arbitrage/event driven and credit strategies.
We earlier reported that New York–based Och-Ziff Capital Management Group’s OZ Master Fund posted a gain of 1.67 percent in May. As a result, the fund cut its loss for the year to 1.22 percent.
